Meeting of the Board of Regents | November 2003

THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234

TO:	The Honorable the Members of the Board of Regents
FROM:	James A. Kadamus
COMMITTEE:	Subcommittee on State Aid and Full Board
TITLE OF ITEM:	Regents Proposal on School Aid for School Year 2004-05
DATE OF SUBMISSION:	November 5, 2003
PROPOSED HANDLING:	Discussion
RATIONALE FOR ITEM:	Policy Development
STRATEGIC GOAL:	Goals 2 and 5
AUTHORIZATION(S):

 

SUMMARY: This year�s Regents school aid proposal occurs in the context of a long-standing Regents focus on closing the gap between actual and desired student achievement and the recent Court of Appeals decision (Campaign for Fiscal Equity, Inc. v. State of New York, NY2d, June 26, 2003) mandating the State ensure sufficient resources to give all NYC students the opportunity for a sound high school education. This has caused a reexamination of funding approaches to increase the effective use of State and local resources to provide students with the extra time and help they need to meet the Regents standards. A review of current formulas reveals that for the past three years most State Aid for school operation has been based on what the district received in the past rather than current data. Thus any system based on updated data to reflect more current needs, costs and fiscal capacity of school districts will result in disruption in State funding. For all of these reasons, this produces a context that provides an opportunity for change.

At the November meeting, I propose a discussion of two approaches to your school aid proposal. Your Subcommittee Chair will lead a discussion with education constituents who serve on our Education Finance Advisory Group, during the first day of the meeting. The Subcommittee will then deliberate on the viability of the two approaches and make a recommendation to the Full Board. The Full Board will deliberate and agree upon an approach to pursue. The Full Board will give consent to staff to seek additional public comment on the chosen approach and to develop the details of the complete proposal, for action in December.

Following is information on two approaches to the Regents State Aid proposal: (1) continuing and building upon recent Regents proposals, and (2) a foundation formula approach with a mandated local effort requirement. The information describes each approach, provides pros and cons, contrasts formula elements and concludes by providing additional explanation concerning a foundation formula.

Two Alternative Approaches: Building on Current Laws and a Foundation Formula

Building on Current Laws. Recent Regents proposals have recommended changes that are grounded in the current system of apportionment formulas. The main feature of the present system is an Operating Aid formula, which provides approximately half of State Aid to school districts. New York�s formula has been described as a mixed approach including foundation, percentage equalizing, pupil weight, categorical and reward-for-effort components. The formula for Operating Aid provides State support for general operation and maintenance of the school district. Operating Aid pays for salaries for administrators, teachers, non-instructional personnel, fringe benefits, utilities and maintenance of school facilities.

In recent years, the Regents have recommended and the State has enacted consolidated aids to simplify the aid system. The Regents have also recommended adjusting Operating Aid for differences in regional costs to provide comparable purchasing power around the State, but this feature has not been enacted. In addition, the State has frozen Operating Aid at 2000-01 levels.

The formula is based on a ceiling of $3,900, established in 1994-95, which is multiplied by a pupil count and a State share, in which a district of average wealth receives about 40 percent of the ceiling (or $1,600 per pupil unit). The State share equalizes aid on the basis of school district wealth compared with the State average, so that wealthier districts should receive less aid per pupil while poorer districts should receive more. Categorical aids provide aid for specific purposes, such as school transportation, special education, shared services and school construction. The School Tax Relief (STAR) program provides separate State revenues to reduce school district reliance on the property tax.

A Foundation Formula. In its purest form, a foundation formula sets forth an amount to support the basic education of a pupil ($X per pupil). It sets a standard of local support in terms of a tax rate and calculates the amount of local support that each district would collect if it actually imposed this specified tax rate. State Aid provides the difference between the foundation amount and that which the school district would raise with this tax rate. The funding system will vary depending on whether the State mandates a minimum local effort level or not. For purposes of the analysis of pros and cons, a foundation formula is described that includes a mandatory minimum local effort requirement. Appendix A provides additional description and examples concerning the functioning of a foundation formula.

Pros and Cons

The following pros and cons contrast a system that builds on current laws with a system using a foundation formula including a mandatory local effort requirement. In reality, states often use strategies that incorporate multiple formula elements. Either type of system can be adjusted to provide funding necessary to close the achievement gap, require a minimum local effort, reduce reliance on hold harmless provisions, etc.

Building on Current Laws

Pros

Cons

 

Foundation Formula with Mandatory Minimum Local Effort

Pros

Cons

Comparing an Approach that Builds on Current Laws with a Foundation Formula

What would a Regents proposal look like with these two approaches? Table 1 contrasts specific details of each approach: overall considerations, and the treatment of Comprehensive Operating, Gap Aid, support for regional services for the large city school districts and aid for school construction. Appendix A provides additional explanation concerning the foundation formula.

Table 1 A Comparison of Potential Proposal Directions Under Two Formula Approaches
		Building on Current Laws		Foundation Formula
Overall Considerations
Funding Increase	Target a multi-year increase.		Target a multi-year increase.
Categorical Programs to be Maintained	Continues targeted general-purpose Big Five grants. A series of categorical programs with specific purposes.		Eliminates all general-purpose grants. Maintains categorical programs implementing a small number of Regents priorities.
Local Effort Requirement	Districts with low effort lose aid provided to hold them harmless against loss.		Minimum effort required in the determination of State Aid.
General Operating Aid
	Comprehensive Operating Aid		Foundation Grant
Consolidation	Consolidates up to 10 aids and grants into a single apportionment.		Consolidates up to 20 unrestricted aids and grants into a single apportionment, including aids for needy pupils.
Factors Affecting Aid Distribution	Aid varies based on fiscal capacity and regional cost.		Aid varies based on fiscal capacity, regional cost and pupil needs.
Ceiling Amount	Ceiling is not explicitly related to cost of education.		Apportionment explicitly reflects cost of education and includes automatic inflationary increases.
Gap Aid
	Consolidates five aids into a new Gap Aid.
	Aid is highly targeted on districts with low fiscal capacity and high concentrations of needy pupils.

 

Table 1 A Comparison of Potential Proposal Directions Under Two Formula Approaches

	Building on Current Laws	Foundation Formula
Regional Services Aid to the Big Five
	Special Services Aid to Noncomponent Districts is enhanced to provide for greater comparability with BOCES Aid.	Special Services Aid to Noncomponent Districts is enhanced to provide for greater comparability with BOCES Aid.
	For the Large 4 city districts, aid additional expenditures for information technology, professional and curriculum development, and Career and Technical Education programs. Aid BOCES administrative costs if contracted through BOCES. For the New York City School District, provide comparable aid with Special Services Aid.	For the Large 4 city districts, aid additional expenditures for information technology, professional and curriculum development, and Career and Technical Education programs. Aid BOCES administrative costs if contracted through BOCES. For the New York City School District, provide comparable aid with Special Services Aid.
Capital/Building Aid
	Supplementary grants for high need districts needing extra capacity.	Supplementary grants for high need districts needing extra capacity.
Transition
	Provides mechanisms for phasing in to the full proposal.	Provides mechanisms for phasing in to the full proposal.

 

 

Appendix A

Foundation Formula with

Mandatory Local Effort

Structure of a Foundation Formula

The basic structure of a foundation formula is simple. The State sets a foundation level or dollar amount per pupil (for example $8,000 per pupil). This amount can be set as the amount needed to educate children. The State also sets a minimum "required local tax rate." (Note that this explanation uses a hypothetical State minimum tax rate of $18.55 per $1,000 of property value for illustrative purposes only.) The State pays the difference to any district whose tax rate is insufficient to achieve the foundation level. In the example that follows, State Aid is adjusted by the cost of doing business to ensure that a dollar of State Aid buys the same goods and services around the State.

 

EXAMPLE 1: A district�s property value is $300,000 per pupil. If this district taxes itself at $18.55 per $1,000 property value, it can generate $5,565 per pupil (300 * 18.55). If the foundation level is $8,000 per pupil, and the cost index is 1.25, the State will pay the difference ($10,000 - $5,565 = $4,435 per pupil).

EXAMPLE 2: A district has $150,000 in property value per pupil. At a minimum tax rate of $18.55 per $1,000 it can generate $2,782.50 per pupil in local revenues (150 * 18.55). If the foundation level is $8,000 per pupil, and the cost index is 1.25, the State will pay the difference ($10,000 - $2,782.50 = $7,217.50 per pupil). This poorer district would receive $7,217.50 in State Aid per pupil.